Value Beyond Cost Savings - Green Building Finance Consortium

Value Beyond Cost Savings: How to Underwrite Sustainable Propertiesability to promote marketing and sales, increase innovation, improve productivity, increaseflexibility, and reduce costs.Exhibit VI-1Underwriting/Due Diligence GuidelinesKey Space-User IssuesStrategic GoalCompliance• Sales & Marketing• Innovation• Employeerecruiting/retention• Productivity• Flexibility• Reduce costs• Meet energy/sustainability goals• Etc.Property SpecificRequirements• Security• Technology• Life & safety systems• Parking• Quality/image• Occupant mission• Design andengineering standards• Etc.Financial Analysis• Corporate return onequity• Economic valueadded• Total occupancy costs• Simple – payback• Value engineering• Asset valuation• Risk/options analysisPre-Purchase/ LeaseDue Diligence• RFP Requirements• Utility bill analysis• Benchmark energycosts• Energy audit• Interview principalusers• Identify and testsystems• Review prior energymodelCorporate real estate decisions are often triggered by very specific property requirementsrelated to security, technology and systems, parking, quality or image, and the specificmission of whoever is going to occupy the space.Corporate real estate financial decisions are also underwritten differently than typicalinvestors. Corporate return-on-investment hurdles are important. Simple payback analysis,total occupancy costs, risk and option analysis, and other analytic techniques are alsoemployed.C. Key Differences in Sustainable PropertyUnderwritingOne of the most important conclusions of the Consortium’s research from the last threeyears is that underwriting and valuation do not have to fundamentally change forsustainable properties. That said, the underwriting process is different. Many sustainableproperty decisions will require additional sub-analysis, new types of data, and a reemphasison different parts of the underwriting and valuation process. Seven of these keydifferences are summarized below:1. New mix and priority of service providers2. Modified list of costs and benefits (risks)3. Priority of energy/carbon reduction investment149